Another day at Tesla: Execs depart, Musk invites controversy
Another executive departure, another controversy over the CEO's behavior, another stock drop.
Another typical day at Tesla.
Although the details change, the pattern stays the same. This time, the executive departure is David Morton, chief accounting officer at Tesla Inc., who called it quits after just a month on the job. The controversy is over Elon Musk taking a hit off an apparent marijuana-tobacco joint during a podcast interview that made its rounds on YouTube. And the stock dropped more than 6 percent Friday to close at $263.24 a share — its lowest point since April.
All of it comes as the electric automaker continues to struggle to convert itself from a money-losing boutique to a mass-production profit machine. It's doing so while under investigation by the government and facing shareholder lawsuits after Musk revealed a plan to take the company private on Twitter, boosting the share price. The estimated $24 billion plan eventually was scrapped and the stock fell.
Tesla only has a few weeks left to deliver on Musk's promise to post sustained profits starting in the third quarter after losing more than $700 million in the second quarter. Moody's Investor Service downgraded the company's debt into junk territory back in March, warning that Tesla won't have cash to cover $3.7 billion for normal operations, capital expenses and debt that comes due early next year. Tesla has said cash from producing more Model 3 mass-market electric cars will pay the bills and drive profits.
Amid the mounting pressure, Musk must now dig himself out of a fresh controversy of his own making. About two hours into the YouTube video of "The Joe Rogan Experience," the CEO accepts a sip of whiskey and a drag off a joint offered to him by Rogan, a comedian and podcast host who makes it a point to note that pot is legal in California.
Shortly after smoking, Musk — dressed in a black T-shirt that says "Occupy Mars" — looks at his phone and laughs, telling Rogan he is getting texts from friends asking why he's smoking weed during the interview. Later, Musk says he doesn't notice any effect from the joint.
"I'm not a regular smoker of weed," he says. When Rogan asks how often he smokes it, Musk replies: "Almost never." He knows a lot of people like weed, but "I don't find that it is very good for productivity," he tells Rogan.
Meanwhile, the company announced in a regulatory filing the departure of Morton, who is quoted by Tesla as stepping down due to the level of public scrutiny and the pace at the company but not over any disagreements with Tesla's leadership or its financial reporting. This followed a report by Bloomberg on Friday that Gabrielle Toledano, head of human resources, would not return to Tesla after a leave of absence. And communications chief Sarah O'Brien confirmed to The Associated Press that her last day on the job was Wednesday. She wouldn't give a reason for her departure, which she said has been in the works for two months.
Late Friday, replacements were named for Toledano and O'Brien, and Musk also promoted Vice President Jerome Guillen to president for automotive, overseeing all auto operations including the parts supply chain. He'll report directly to Musk, the CEO said in a note to employees.
Paul Argenti, a Dartmouth College professor of corporate communication, said the latest controversy is not surprising.
"The behavior on YouTube is obviously in line with what we've seen in the past," he said. But, he added, "You can't go on like that forever. It catches up with you."
Musk's conduct has been questionable since the first-quarter earnings conference call when he criticized Wall Street analysts for asking "bonehead" questions about the company's finances. Then he labeled a British diver who aided in the cave rescue of Thai soccer players a pedophile, and after apologizing, doubled-down on his accusation again this week in emails to Buzzfeed News.
But the most questionable action came when Musk tweeted Aug. 7 that he had secured funding to take the company private at $420 per share to get away from the short-term pressure of Wall Street. The tweets pushed the electric vehicle and solar panel maker's stock price up 11 percent that day. But it subsequently fell when Musk revealed that funding wasn't locked down.
On Aug. 24 Musk put out a statement saying the go-private deal was off, drawing scrutiny from the Securities and Exchange Commission.
Some analysts and investors have called on the board to replace Musk as CEO but keep him as chief product officer, or hiring a chief operating officer to handle daily operations. Messages were left Friday with board members, including lead director Antonio Gracias.